DWS Global Equities Senior Portfolio Manager Madeleine Ronner says in the short-term, markets will concentrate on having certainty on trade deals than the actual tariff rates.

Washington

Donald Trump has signed an order to impose tariffs imports into the U.S. from countries including China, Mexico and Canada.

Global Tariffs

Trade agreements are playing a significant role in driving global market sentiment, as demonstrated by the recent surge in equity markets following the US-Japan trade deal. Market participants are closely monitoring ongoing tariff discussions, especially regarding Europe, where a 15% tariff rate is higher than anticipated but provides some certainty for investors. 

Earnings season in the US has generally exceeded expectations, particularly in sectors related to artificial intelligence and technology infrastructure. However, high valuations mean that companies missing expectations face sharp stock declines. In Europe, while growth lags behind the US, improving manufacturing indicators and fiscal stimulus offer some optimism, especially in sectors like aerospace and defence, though volatility is expected.

Why trade deals will be a major driver of sentiment

Let me start off by asking you, first of all, a big macro question about these tariff discussions and the trade discussions that have been going on. We saw a big boost to global equity markets this week after US and Japan announced that they had secured a trade deal. To what extent do you think further trade deals will continue to drive sentiment in global equity markets? I think they will be a major driver of sentiment and also of stock movements. We see it especially in the German equity index as well. There has been just a rumour that we're nearing a trade deal and stocks exploded on the upside. So, everybody is looking at it very closely. I feel like the 15% is higher than what we were hoping for, especially for a trade deal with Europe. We were hoping more for a 10% baseline and then some special tariffs on specific areas and like 13% in total. So, obviously, it doesn't look like we will get that. It will be higher than that, but apparently for now, at least in the short-term, markets will concentrate on having some certainty around what will happen and around the numbers. And as soon as we get that, I feel like that will be quite helpful, especially for the stocks affected, like in the automobile industry, for example, and will matter more than short-term results that we currently see. However, in the long-term, I feel like the 15% are still quite high. So, investors should be a little bit cautious on the longer-term effects and don't be too euphoric on the optimism. Yeah, yeah, very fair on that 15% number. What is your take of the earnings season so far and what we've got out of the U.S. this week? Yeah. So, I think it's better than we generally expected. So, we're seeing relatively good breadth. We see a lot of beats. However, stocks react also very strongly on the upside and on the downside. So, even slight misses gets punished quite harshly in some areas. But generally, positively surprised, especially in the U.S. I think we see good earnings across the board in financials and banks, even though there are the stock reactions where we're muted because expectations were high. But we see it in tech particularly. So, everything that has to do with artificial intelligence and especially the infrastructure behind it is very, very strong and the numbers are really impressive. So, we have some companies that are doubling EPS over the quarter and we see some effects of that in Europe as well, right? Yeah, it's interesting what you were saying about investors sort of punishing misses more than their rewarding wins. What does that tell you about current valuations in U.S. stock markets? It tells you exactly that. I mean, valuations are very high, expectations are very high. So, if you're not able to meet that, obviously, the stocks react harsher than they would if valuations were not as elevated. So, that's kind of also why you're seeing it more in the U.S. than you do see it in Europe. Yeah. What are you thinking about Europe here? Just to tie back to what you were saying, assuming we do get that 15% tariff rate, maybe the market breathes a sigh of relief because the uncertainty is out of the way, could create problems further down the track. Do you actually see an investment opportunity based on the valuation disparity between Europe and U.S. or would you still be cautious? Yeah. So, we still prefer European stocks. I mean, honestly, in this earning season, the U.S. is still ahead. So, we still see better growth at the U.S. than we see in Europe. And investors have been struggling more to get excited about European earning season this time, which is not surprising. Our main case around Europe sits on two bases, which is for firstly, the valuation discount that we see versus the U.S. and the second one would be that we now just get improvements because of the fiscal stimulus that we are seeing across the board, not only in infrastructure, but also in defence, but that will take some time. I mean, we would see the E4 is already starting to improve. We will get the new numbers right now or today. So, we see for the manufacturing industry that's more important for Europe. We see some acceleration there as well. So, European PMIs have been improving, the new auto component in the last print has been positive. So, we see some positive momentum there. We wouldn't have expected it to see this earning season already. However, it is obviously crucial that this positive EPS momentum that we've seen in Europe over the last four years, which has been better than in the last 15 years, where the valuation discount really has started to come up, that needs to improve further. If that doesn't improve, the valuation itself will not help, but more of a second half of the year thing. And it can continue. It can continue. Yeah, structurally. Let me ask you about one of the darling trades of Europe this year, the aerospace and defence industry. Has that trade started to lose some steam, do you think, because it was so popular in the first few months? In the last weeks, it has lost some steam, which is, I think, natural after the strong run that it had in the first half of the year. I still think the trends behind it are very strong and in the medium term, I still have a high conviction and we still are positioned that way in our portfolios as well. So, we like the space, commercial aerospace as well. We have decades of backlog, the supply and demand imbalance is really high. So, we like commercial aerospace, but we like defence as well. However, you do see that now a lot of that is dependent upon execution. So, for example, if the ability to scale production is not as fast, it takes some time and markets can be disappointed by that in the short run. However, especially in the more shorter cycle areas of defence, we're still very positive and in the midterm and in the short term as well. But you can expect some volatility in these names.

Tens of thousands flee as border fighting between Cambodia and Thailand intensifies — with no ceasefire in sight.

Preah Vihear Province

Cambodia calls for ceasefire with Thailand

Typhoon Co-May has moved away from the Philippines but many low-lying areas are still severely flooded. Three storms dumped a months’ worth of rain in a span of a week on nearly the entire country.

Manila

At least 30 killed in Philippines typhoon

EU Commission President Ursula von der Leyen has said she will meet US President Donald Trump on Sunday in Scotland to "discuss transatlantic trade relations."

Glasgow

Ursula von der Leyen to meet Donald Trump to discuss trade

President Trump signed an executive order Thursday aimed at dramatically changing how the U.S. approaches homelessness.

Trump signs executive order changing U.S. approach to homelessness

Typhoon Co-May has left a trail of destruction across the Philippines, making landfall in the country's northwestern region. Torrential rains and strong winds have battered towns and cities, damaging homes, roads, and farmland. At least 25 people have been reported dead.

Pangasinan

Philippines hit hard by Typhoon Co-May, dozens killed

Israeli Prime Minister Benjamin Netanyahu and U.S. President Donald Trump appeared on Friday to abandon Gaza ceasefire negotiations with Palestinian militant group Hamas, a day after withdrawing their delegations from talks.

Jerusalem

Middle East Conflict

Netanyahu, Trump appear to abandon Gaza ceasefire negotiations

U.S. President Donald Trump is spending five days in Scotland visiting his luxury golf resorts. While the White House touts the economic impact, some locals say the developments have scarred the land and stirred controversy.

Edinburgh

Trump visits Scotland to tour golf courses amid protests

The U.S. Department of Justice is set to meet with Ghislaine Maxwell, Jeffrey Epstein's convicted accomplice, amid mounting political pressure on President Donald Trump over his administration's handling of the Epstein case.

Ghislaine Maxwell to meet with U.S. Justice Dept. amid Epstein probe

Thailand and Cambodia exchanged heavy artillery fire for a second day on Friday (July 25) as their worst fighting in over a decade intensified and spread to new areas, despite international calls for a ceasefire.

Bangkok

Thailand, Cambodia exchange heavy artillery

France intends to recognise a Palestinian state in September at the UN General Assembly, President Emmanuel Macron said in hopes of bringing peace to the region, but the plan drew angry rebukes from Israel and the United States.

Macron says France will recognize Palestine as a state

Ukrainian President Volodymyr Zelensky has approved a draft bill to restore the independence of anti-corruption agencies, following nationwide protests and EU concerns over recent reforms that threatened their autonomy.

Ukraine Invasion

Zelensky approves anti-corruption bill after protests

Chinese and European Union leaders have met in Beijing for their first in-person summit since 2023, addressing a range of contentious issues amidst growing trade tensions. The talks, led by Chinese President Xi Jinping and EU officials Ursula von der Leyen and Antonio Costa, highlighted the complex nature of China-EU relations.

Beijing

China-EU summit ends in climate deal, talks strain over Ukraine

The United Kingdom and India have signed a trade agreement that will reduce tariffs on goods from textiles to whisky, cars and spices and allow more market access for businesses. British PM Keir Starmer hailed the agreement as a “landmark moment” for both countries.

London

UK, India sign free trade agreement during Modi visit

President Trump and Federal Reserve Chair Jerome Powell had a disagreement almost immediately as the two men set foot in the Fed's headquarters in Washington to survey an extensive renovation project on two of the reserve's buildings. Nancy Cordes has more.

Trump, Powell clash during tour of Federal Reserve renovations

Hulk Hogan, the legendary professional wrestler whose real name was Terry Bollea, died on Thursday at the age of 71, according to World Wrestling Entertainment.

Clearwater

Wrestling legend Hulk Hogan dead at the age of 71, WWE says

At least 12 were killed as a Thai-Cambodian border dispute escalated into deadly clashes on Thursday (July 24).

Surin

Thailand bombs Cambodian targets as border clash escalates

According to preliminary data, 43 passengers, including five children, and six crew members were on board.

Tynda

Passenger plane crashes in Russia, killing all 49 people on board

Pro wrestling legend Hulk Hogan has died, World Wrestling Entertainment said in a statement on social media. He was 71. CBS News' Shanelle Kaul has more.

Hulk Hogan dies at 71, WWE says

The Wall Street Journal reports that former Attorney General Pam Bondi told President Trump his name appeared in the Epstein files. The White House denies wrongdoing.

Report: Trump was briefed on mentions in Epstein files

Columbia University will pay $200 million to resolve federal claims it failed to stop harassment of Jewish students during campus protests. The Trump administration had suspended the school's access to $400 million in funding.

New York

Columbia settles for $200 million over antisemitism claims

Israel issued a statement indicating that Prime Minister Benjamin Netanyahu has asked the Gaza negotiating team to return to Israel for ceasefire talks. CBS News' Ramy Inocencio reports.

Israel brings back Gaza negotiating team for ceasefire 'consultations'

Also in the settlement is an agreement to ask prospective international students “questions designed to elicit their reasons for wishing to study in the United States,” and establishes processes to make sure all students are committed to “civil discourse.”

Columbia University to pay more than $220M in deal with Trump

There are several developments in the cases involving Kilmar Abrego Garcia, the migrant in ICE custody whom the Trump administration wrongly deported. CBS News' Katrina Kaufman reports.

Nashville

Kilmar Abrego Garcia to remain detained following new court orders

Dr. Salvador Plasencia admitted to distributing ketamine to actor Matthew Perry before his 2023 overdose. He is the fourth person to plead guilty in the case and faces up to 40 years in prison.

Los Angeles

Doctor pleads guilty in Matthew Perry death case

While both sides acknowledged progress on humanitarian issues, talks on a full ceasefire remain stalled. Turkish Foreign Minister Hakan Fidan called for "result-oriented negotiations" to end the devastating war.

Istanbul

Russia and Ukraine conclude third round of peace talks in Istanbul

A passenger plane has crashed in southeastern Russia with up to 49 people onboard. Emergency services say the An-24 aircraft took off from the city of Khabarovsk and was heading to the town of Tynda. Wreckage was found on a mountainside around 15 kilometres from the flight's intended destination.

Russian passenger plane with 49 on board crashes

Ukraine's President Volodymyr Zelenskiy vowed to retain the independence of anti-corruption agencies, bowing to pressure from the first wartime street protests and rare rebukes from European allies.

Kyiv

Zelenskiy to protect anti-corruption agencies, bows to protests

U.S. President Donald Trump's name is among the many appearing in the Epstein files, according to the Wall Street Journal, and he was told as much earlier this year by the U.S. Justice Department.

Trump calls reports he knew his name is in Epstein files ‘fake news’

Dr. Salvador Plasencia, the doctor accused of supplying Matthew Perry with ketamine in the month leading up to his death, has pleaded guilty to four counts  of distribution of ketamine. Plasencia is the fourth of the five people charged in connection with Perry's death to plead guilty.

California

Doctor accused of supplying ketamine to Matthew Perry pleads guilty

Russia and Ukraine have exchanged prisoners following the latest round of talks in Istanbul. The swap, involving dozens of soldiers — some severely wounded and held since the war’s start in 2022 — took place on Wednesday night. While the prisoner exchange marks a rare point of agreement, both delegations remain divided on ceasefire terms.

Why trade deals will be a major driver of sentiment

Breakdown

See The Full Story

Global Tariffs